TSMC reported sales of 250.9 billion Taiwan dollars (about US$7.8 billion), up 33% from last year. Although the growth rate slowed from July's 45%, these results still indicate a steady market recovery from the pandemic slumps. For the third quarter, analysts expect TSMC to record 37% revenue growth, indicating a continued recovery in the sector. [1]
AI demand and market stabilization
What intrigues me, however, is the implication of these numbers on the broader market. TSMC's revenue growth is a signal that demand for AI infrastructure and chips that support advanced computing could be sustainable. The recent fluctuation in the value of Nvidia shares, which lost around $279 billion in value in one day after releasing financial results that fell short of the market's exaggerated expectations, has raised some concerns[1]. * Today's TSMC numbers, however, bring relief for investors like me who are focused on the AI segment.
Analyses led by Mark Lim of Bernstein show that if sales in September reach the average seasonality of the past eight years, TSMC could beat expectations for the third quarter by 5% to 6%. That trend could also help the company beat the midpoint of its initial forecasts. TSMC today generates more than half of its revenue from the high-performance computing segment, which is dominated by demand for AI chips.
Partnerships and growing demand for smartphone chips
Another interesting factor in the current developments is TSMC's close collaboration with Nvidia and Apple. TSMC is a major manufacturer of processors for the iPhone, whose latest model, the iPhone 16, has just been introduced to support artificial intelligence features. This alliance has the potential to further increase demand for TSMC chips, especially as Apple integrates technologies such as Wi-Fi 7, which could accelerate the adoption of this technology and increase interest in TSMC's specific manufacturing nodes.
In its last earnings release, TSMC provided an upbeat outlook for the full year and raised its revenue growth estimate above the previously forecast mid-20%. This positive outlook reassures me that TSMC is still in a strong position in the market and that its current expansion, including the expansion of manufacturing capacity in Arizona, Japan and new investments in a factory in Germany, will enable it to keep pace with growing global demand. [2]
Global expansion and market opportunities
CEO C.C. Wei is leading the company toward significant global expansion, which is another reason I have confidence in TSMC's future growth. Ongoing projects, such as plants in the U.S. and planned developments in Japan and Germany, create a solid base for future growth. This global expansion will enable TSMC to serve its key customers more efficiently and adapt to growing technology demands.
TSMC's results today reinforce my belief that this is an investment with a positive long-term outlook. While it is important to monitor market conditions and global economic factors, TSMC continues to demonstrate the ability to adapt quickly to new trends and technologies. This growth is a compelling argument for maintaining positive investment sentiment towards the company. [3]
* Past performance is no guarantee of future results
[1], [2], [3] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or based on the current economic environment which is subject to change. Such statements are not guaranteeing of future performance. They involve risks and other uncertainties which are difficult to predict. Results could differ materially from those expressed or implied in any forward-looking statements.
[1] TSMC's stock price performance over the past five years: https://tradingeconomics.com/tsm:us
